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Informal
Innovation

Networks that power start-up cities

For decades, cities have been trying to capture the elusive formula that transforms them into thriving entrepreneurial hubs. “Re-create Silicon Valley here” might describe the mission city fathers have set themselves as they’ve poured investment into technology parks, incubators and other structures designed to nurture innovative start-ups. Some top-down projects meet with success; more don’t. Many create benign tax and regulatory regimes to help fledgling businesses onto their feet; some even manage to create the right conditions for venture capital (VC) and other finance to flow into start-ups. Governments are vital for getting the formal structures in place, however, other participants in a cities start-up community have a vital role to play.

In recent years it has become apparent that entrepreneurs helping entrepreneurs in informal networks are a core component of what’s become known as a “start-up ecosystem”.1 Access to finance, talent and ideas are integral to any such ecosystem, as are the formal structures which facilitate such access, such as incubators, accelerators and co-working spaces. Entrepreneurs’ connections with their peers, however, have been shown to be as important to start-up growth in some cities as the role of institutions.2

New research from The Economist Intelligence Unit (EIU), sponsored by Info-communications Media Development Authority of Singapore, confirms that informal entrepreneur communities are instrumental to start-up success in several world cities that are known for their nurturing of innovation.

Founders of new businesses naturally rely on banks, VC funds, seed or angel investors, and sometimes government grants, for funding. They often turn to industry associations for advice on legal or regulatory conditions. Incubators and accelerators may also offer help in these areas, as well as the physical space in which to operate.

But people embarking on their first ventures don’t necessarily know how to identify and tap into these sources. They often don’t know who’s who in their ecosystem. They’re often in need of advice about their business model, the technology best suited to their circumstances and where to source it, where to recruit skilled specialists, or about marketing ‘do’s and don’ts’. Sometimes they’re just in need of encouragement to overcome the fear of failure. This is where informal networks prove their worth.

“If you don’t have an ecosystem of people you can tap into for support, to help out with, say, finding talent or just making contacts, it’s 20-30 times harder to get your business off the ground.”

– Bryce Keane, co-founder, 3beards (London)

What do informal networks look like?

Entrepreneurs have always connected with their peers, whether in ancient agoras, medieval guilds or Renaissance coffee houses. But leaps in digital capabilities – particularly the Internet and mobile technology – have led to the formation of new types of entrepreneur communities and energised grass-roots networking activities.

Indeed, many such communities today reside online. Entrepreneurs are avid digital networkers. Over half the participants in our survey are hooked into entrepreneur-oriented social networking groups on global platforms such as LinkedIn, Facebook or WhatsApp, and most of these people participate in multiple groups. Just over one-third also connect with other entrepreneurs in locally oriented online groups.

Other communities focus on in-person networking. These activities – which are mobilised through digital channels – frequently take place in an informal setting. In London, for example, Shoreditch bars are popular venues for get-togethers of technology entrepreneurs. In New York, they may meet each other at cocktails hosted by a university alumni association. In Singapore it may be “hackerspaces” which bring together technology innovators, or university departments – even individual professors – who invite their alumni to get-togethers along with other industry contacts.

“If I want to find out something that I need to get done or to get or make an introduction to someone new, my natural tendency is to meet over a coffee or a beer. That’s the first step.”

– Rob Findlay, founder, NextBank; SVP, DBS (Singapore)

The online and face-to-face communities appear to play different roles as forums for support. The online space, according to Alice Bentinck, co-founder of Entrepreneur First, a London-based accelerator, is where practical issues are typically addressed, such as recruiting challenges, finding office space, or understanding specific health and safety regulations. For higher level inputs, she says, such as advice on one’s business model or marketing strategies – or alternatively for making useful contacts or simply sharing war stories – nothing can replace the face-to-face environment.

Hybrid communities

In a start-up ecosystem, online and offline networks and activities are complementary rather than competing sources of support. So too are informal and formal communities. Accelerators, for example, focus on developing select groups of start-ups in highly structured programmes of finite duration, sometimes in return for equity. But many accelerators, recognising the value of peer advice and experience-sharing, also facilitate informal networking events involving the wider community of entrepreneurs. According to Patricia Lahy-Engel, director of The Hive by Gvahim, a Tel Aviv-based accelerator, these also serve the purpose of recruiting new participants.

Informal, unstructured networking activities require dedicated teams working in structures to organise them. In many cases, what started five or seven years ago as small groups of volunteer event planners with day jobs are today larger not-for-profit (and sometimes commercial) organisations whose mission is to facilitate entrepreneurial communities. Examples include Startup Grind, which launched its maiden Silicon Valley chapter in 2010 but now supports communities in 180 cities around the world. Another is 3beards, the facilitators of Silicon Drinkabout, which began in London in 2011 as a Friday night get-together for tech-sector entrepreneurs. Local affiliates now run weekly “drinkabouts” in 17 cities on different continents.

Large or small, highly organised or ad hoc, such facilitators share the common objective of creating spaces, virtual and physical, where entrepreneurs connect with each other on their own terms to solve problems, offer moral support and ultimately to help each other grow.

Where do such communities thrive? The EIU has researched 10 cities that enjoy a reputation as centres of innovation in one form or another. Informal and formal entrepreneur networks co-exist in all of them, but their relative importance varies considerably from one to another. The types of support such communities are good at providing also differ across each city.

1. A prominent elucidation of the concept was advanced by Compass – formerly Startup Genome – a research group which has published an annual Startup Ecosystem Ranking since 2012.

2. See, for example, The Power of Entrepreneur Networks, a study of New York City’s start-up scene published by Endeavor Insight in 2014.

A world of communities – Global summary of the research results

Even in the most business-friendly cities, starting a new company is anything but easy. New York City trails only Silicon Valley in the 2015 edition of the Global Startup Ecosystem Ranking, yet only 32% of New York entrepreneurs in our survey say it was easy to launch their business there. In the San Francisco Bay area itself, the figure is only slightly higher, at 33%. In Tel Aviv, which comes 6th in the aforementioned ranking, 67% of entrepreneurs have found it difficult to start a new business. The most problematic city for start-ups in our group of 10 is Seoul, where 71% have found the process difficult. The easiest, by contrast, is London, but even here no more than 35% of respondents report a smooth ride in launching their business.

Not surprisingly, a dominant challenge facing new business founders around the world is a lack of funding. Entrepreneurs devote a large amount of their time in the pre-launch, start-up and scale-up phases to sourcing angel or seed investment or bank loans. But tight financing is far from their only hurdle. Large numbers in the survey complain of being unable to identify or tap government support, and of being burdened by red tape. Two other oft-cited challenges are more intangible—a fear of failure and a lack of entrepreneurial role models.

In such circumstances, the advice of peers and mentors is sorely needed. “If you don’t have an ecosystem of people you can tap into for support, to help out with, say, finding talent or just making contacts, it’s 20-30 times harder to get your business off the ground,” says Bryce Keane, co-founder of London-based 3beards, which facilitates entrepreneur networking events in the technology sector.

Finding good advice

Against this background it should not come as a surprise that informal communities have become important sources of support to entrepreneurs when starting their businesses. Globally, new business founders rely heavily on banks as well as industry associations for help during the start-up phase. But informal communities and activities are as, or more, important to our survey group than formal structures such as incubators and accelerators, and are nearly as important as associations. In Tel Aviv – where launching a start-up is comparatively difficult (see above)—meeting fellow entrepreneurs in informal settings is the single most important source of support. The same is true in New York and London.

For Sharon Klapka, chairwoman of New York Hearts Tech, a community set up to support online businesses in the fashion, beauty and lifestyle industries, this finding is self-evident. Formal structures such as incubators and accelerators are useful, but to a limited number of entrepreneurs and in a limited fashion, she believes. Participating in community networking activities, says Ms Klapka, “can expose people to a larger universe of peers in informal, comfortable settings, where they can get advice on any number of issues.”

78% agree: “The informal environment will be important or very important to their business over the next three years”

Entrepreneur communities are rich sources of business model advice for new business founders. “Are we targeting the right market segment with our product? Are there potential partners out there who could help us reach that segment faster? Could our model be undermined by lower cost or bigger rivals?” Mentors organised through incubator or accelerator programmes help answer such questions. But similar questions are posed to peers in informal settings, such as those organised in London by 3beards, where founders demo their products and get group feedback in monthly gatherings.

Communities are also useful forums for getting practical advice from peers. This might take the form, as highlighted by the survey respondents, of referrals to potential customers or suggestions of how to resolve particular technology issues (naturally a frequent topic of discussion given that technology underpins most start-up business models today). In Singapore, according to Ted Chen, a co-founder of Evercomm, an energy start-up, informal communities also point new business founders to the various sources of government support that exist there for new businesses.

“Especially for first time entrepreneurs, informal networking is needed just to gain an understanding of the local ecosystem.”

– Ted Chen, co-founder, Evercomm (Singapore)

Networking comes naturally

Entrepreneurs are avid networkers. Over half of the survey group (58%) are hooked into entrepreneur-oriented social networking groups on global platforms such as LinkedIn, Facebook or WhatsApp. Over one-third (36%) also connect with entrepreneurs in locally oriented social networks or “meetup” groups. And they are tapped into not one but several such networks: half of the survey respondents are involved in six or more global networks (28% in more than 10), and 44% participate in six or more local online groups.

“Online groups are really powerful [for entrepreneurs] in Singapore. The best are mobile-based chat groups. They’re great for throwing an idea out there and seeing what everyone else thinks, as a bit of a feedback loop.”

– Rob Findlay, founder, NextBank (Singapore)

When it comes to global networks, entrepreneurs in Ho Chi Minh City emerge as the most “polygamous”: 39% of respondents there are involved in more than 10 groups. Singapore and San Francisco entrepreneurs are only slightly less active, with 34% and 32% of respondents respectively, taking part in more than 10 networks.

Participation in physical networking activities is less frequent than the online variety – which is logical given that the former requires a larger time investment. One exception to this is Shanghai, where the various forms of online and physical networking are similarly high; the other is Seoul, where networking activity in general is considerably lower than elsewhere. Online and physical networking activities do appear to be complementary, rather than mutually exclusive. Nearly three in 10 (29%) in the global sample attend physical networking events organised by business associations in their city, and nearly the same number visit co-working spaces or innovation hubs or some sort. Just over one quarter (26%) attend networking events organised by supra-national groups such as international alumni associations, and 23% attend these events when organised by locally-oriented groups, such as high schools or community organisations.

Active networking appears to have a positive impact on the performance of entrepreneurs’ businesses. Among the global sample, the greater the number of networking activities entrepreneurs engage in – whether they are in social media groups, in physical events, in visits to incubators or co-working spaces, or taking other forms – the more likely it is that they will deem themselves stronger than their competitors in terms of profitability, revenue growth, innovation, capitalisation and talent.3

Knowing where to look

Founders of all new businesses are chronically strapped for time. Setting aside some to identify and learn about the communities that can help them is a challenge, and particularly so for first time entrepreneurs just learning the ropes. The good news in this context is that the overwhelming majority (87%) of survey respondents say that their knowledge of the entrepreneurial communities in their city has improved in the past three years.

Less positive is the result that 55% of them find it difficult to access informal communities because their ad hoc nature makes them hard to find. Hong Kong and Seoul respondents find this a particular challenge. But neither is it straightforward, apparently, in Western cities such as London. Mr Keane of 3beard finds this surprising, suggesting that browsing the web should quickly yield the identity of a number of relevant communities. He and other community facilitators acknowledge, however, that many, if not most, of their participants come to them through word-of-mouth referrals. The larger communities likely to have prominence on the web are also a relatively recent phenomenon, emerging in the past 5-6 years.

Can (and should) governments help?

In many cities, governments are active supporters of formal support structures such as technology parks and incubators. National or local government departments may be financial sponsors of some organisations, or provide other forms of financial support. It is generally not the case when it comes to entrepreneur communities, especially the informal kind.

The majority of survey respondents (55%) gave positive marks to their governments for broad support to entrepreneurship in their cities. This does not extend to communities: seven out of 10 believe official support for entrepreneur communities is insufficient (a notable exception is Shanghai, where this is the view of only 43% of respondents); nearly nine in 10 say government should do a better job of supporting them. (On this latter point, Shanghai entrepreneurs wholeheartedly agree.)

This is not, however, a universally held view among community facilitators. Some doubt the value of government support for what is by nature grass-roots networking. For others, government support comes with uncomfortable strings attached. “We value our independence,” says Mr Keane.

3. Caveat: Respondents were asked to assess their firms’ performance vis-à-vis their industry peers, so some personal bias may colour their responses.

Brett King has been making waves in the retail banking sector since founding his FinTech startup, Movenbank, in New York in 2010. Six years on, Moven is an established mobile-only bank feted by traditional banks and Mr King is as outspoken as ever about the future of banking and disruption in general. His book Augmented: Life in the smart lane looks beyond banking, prophesising about a world that will change more in the next 20 years than it has in the last 250 years. Mr King answered questions from The Economist Intelligence Unit (EIU) by e-mail.

Whereas transcripts like this are often published with a note saying that they have been edited down for length and clarity, these are Mr King’s replies in their entirety.

Talk of disrupting financial services is common these days, but back when you started Moven, it was still controversial and heavily resisted by traditional banks. What made you take the leap?

Moven started as Move-and-Bank or Movenbank. I had the idea for a mobile-only direct challenger bank when I was doing the book launch for my book BANK 2.0 in Los Angeles in 2010. Speaking to investors and business leaders at the book launch about the future of banking and how a bank account would work in 2025, I essentially was pitching my business, but just didn’t know it yet. About an hour after I left the book launch, I had already registered the domain for Movenbank.com and then I started working on concepts for the app.

Starting a business is tough at the best of times, but when you are trying to disrupt an incumbent as powerful as the banking sector, the challenge must have been daunting. What support did you have, informal or formal?

Formally very little, with the exception that we’ve actually had decent support from the Consumer Financial Protection Bureau and the US Treasury folks throughout our incubation, especially in terms of their availability to bounce ideas off. In terms of informally, I think one of the reasons Moven is a household name in FinTech today, especially in industry circles, is the broad range of support we’ve had globally through social media. Especially through my pals at the so called FinTech Mafia—a group of professionals globally who’ve been in FinTech and discussing disruptive start-ups since the 2008/2009 timeframe. The support of platforms like American Banker, FinExtra, Finovate and others through the early days was also critical.

You are well known within FinTech and amongst entrepreneurs because of your active networking on social media, book tours and speaking appearances. How important has networking been to your success?

I’ve found networking essential to building both my personal brand as an author and speaker, and on behalf of Moven. In the example of Moven, actually my personal brand as an entrepreneur and Moven’s brand as a start-up have been closely correlated. I have about 45,000 followers on various networks, but I find the best amplifiers of my messages on social media are people I’ve met in person as I travel the world speaking. So when I’m on the road I am always keen to meet up with followers for a coffee, sign a copy of my book, and talk FinTech, because those turn into much stronger and higher quality connections over time. It is also how I learn about the local FinTech scene first hand.

EIU research found that out of 10 global start-up cities, New York’s entrepreneurs are the most prolific participants in physical networking events. Do you still tap into the vibrant local community?

New York has so much activity that it’s hard to sometimes figure out the right focus. I guess my biggest challenge is finding the time these days. I’m not sure that New York could improve per se, but I think I could probably learn to utilize the benefits of New York’s community better. The New York Angels and people like David S Rose have been critical in our development of Moven to-date.

In an EIU survey, many entrepreneurs cite mentoring as the second-most valuable type of support —business model advice is the most valuable. What role did mentors play in your development as an entrepreneur?

I have a number of mentors and champions that helped me over the years. Among them are my co-founder at Moven Alex Sion, my pals Josh and Shamir at Simple, who I bounced ideas off constantly in the early days, Phil Strause and Sean Clifford during my Deloitte days; clients like Peter Brooks, Michael Armstrong, Matt Dooley and Paul Thurston at HSBC, Suvo Sarkar at Emirates NBD, and Rizwan Khalfan at TD; my agent Jay Kemp, who has managed my speaking business the last few years; industry leaders who made themselves accessible like Ken Rutkowski, and Robert Scoble; Chris Skinner, who gave me coaching back in 2009, when I was writing my first book. There’s a ton of people I can thank for helping me get where I am today.

The rapid success of founders of so-called unicorns—startups with billion dollar valuations—is inspiring a whole generation of people to become entrepreneurs. But it can be a difficult and risky career path. What do you think is the biggest challenge for aspiring entrepreneurs?

Having a great idea is tough. Some people believe so much in their idea, they can’t see the flaws. So you need to make sure you have tested your idea honestly. The most critical challenge is just having the willpower and energy to stay in the game when it gets tough—persistence is underrated in this business.

The good mentor

Networks for talent

Government and start ups: Striking the right balance

For a first-time founder of a small business, getting started is full of unfamiliar challenges. Developing the business plan, lining up finance, registering the company, hiring required specialists –novice entrepreneurs usually lack experience in these and many other areas. What they will probably lack most, however, is connections.

Start-up founders need introductions to people in the know – with knowledge of, for instance, which government agencies offer small business grants in their industry, where cheap office space can be found or the names of reliable suppliers of particular types of technology. Even seasoned entrepreneurs need to make new connections if their new ventures take them into sectors or product areas they haven’t worked in before.

Networking communities are where new business founders will get started. As highlighted in the global summary of the EIU survey results, entrepreneurs in the 10 cities in our study are keen networkers. Over half take part in entrepreneur-oriented social network groups online. Just over one-third join locally-oriented online groups. A quarter or more of the survey respondents attend physical networking events organised by business associations, by supra-national groups such as international alumni associations or by locally-oriented groups. Their first objective: make connections. “It’s all about introductions, isn’t it?” says Ted Chen, co-founder of Evercomm, a Singapore energy company and by now a veteran of several start-ups.

Relaxed or formal

Structured accelerator and incubator programmes make it their business to introduce the start-up directors in their fold to more experienced entrepreneurs (often serving as mentors) and others, such as investors, who can help them grow later on. Informal communities and events, however, are where a wider universe of connections are made. “Formal communities are good for structured development programmes, and hooking young entrepreneurs up with experienced mentors, advisors and investors,” explains Alice Bentinck, co-founder of Entrepreneur First, a Europe-focussed accelerator based in London. “Informal communities are about meeting people who are just like you. People are interested to hear interesting speakers at some events, but they’re mostly interested in meeting and talking to each other.”

Many accelerators, in addition to their structured programmes, also facilitate informal communities, which usually include alumni entrepreneurs and other individuals active in the local start-up ecosystem. One such “hybrid” support structure is SOSA, a self-styled “innovators’ community” supporting start-ups in Tel Aviv. According to its CEO, Roy Oron, SOSA supports its members in two ways: “There is the curated element – curating interactions between people. But that’s not enough: we also make room for the unstructured serendipity of putting all the different stakeholders on one platform so when you walk our floor, you will bump into other start-ups, investors, domestic and global corporates, and others.”

“Informal communities are about meeting people who are just like you.”

-Alice Bentinck, co-founder of Entrepreneur First

Mr Oron advises start-up founders to try and find one highly connected person and use him or her to make further connections. “This person would be your ‘one-to-many node’. Find someone who’s built up a network over several years and has scars on their face. Once you connect to that person you will get connected to many other nodes, to anyone who can help you in that industry.” Accelerators are likely to have such “nodes” amongst their own directors – Mr Oron is an example – or the mentors brought in to work with start-ups in their programmes.

Start-up founders not involved in accelerator or incubator programmes (the vast majority) are more likely to meet such connected entrepreneurs at facilitated events. Founders should do their homework in advance, however, and not leave things to chance. Marian Gazdik, Europe director of Startup Grind, a global entrepreneur community that got its start in Silicon Valley, recently advised participants of its monthly events to identify in advance the individuals they really want to meet, memorise the list and be sure they arrive early enough to give themselves time to find them and introduce themselves.1

In some cities, formal structures such as business associations are useful facilitators of introductions for first-time entrepreneurs. Evercomm’s Mr Chen states that he and his circle of fellow Singapore entrepreneurs typically turn first to industry associations for introductions (and other information and support) when launching new B2B ventures. He has also made several valuable connections in industry and government through his erstwhile professors at Nanyang Technological University. An additional benefit of Singapore’s faculty networks, says Mr Chen, is the introductions they are able to make to connections in overseas markets.

Co-working spaces – physical environments shared by individuals and small businesses in the same industry or which have the same interests – are also proving to be useful venues for making connections. Co-working spaces are increasingly popular among entrepreneurs in some Asian cities – Shanghai, Ho Chi Minh City and Hong Kong are examples – due largely to their cost effectiveness in the face of rising office rents elsewhere. But some co-working spaces are also becoming event facilitators and helping their clients to make needed connections. An example in Ho Chi Minh City is WORK Saigon, a fast-growing business with an informal seminar on entrepreneurship that has now become a regular event.

Peer value

Connections to other entrepreneurs, however facilitated, are vital to the success of start-ups. A study published in 2014 by the research arm of a New York-based accelerator, Endeavor2, found that New York City start-ups that are connected to or influenced by founders of other top-performing technology firms based there, are more likely to be successful than start-ups connected just to accelerators or incubators. And the more successful such start-ups become, the study found, the more likely it is that the start-up founders will themselves make connections to, and influence, earlier stage start-ups. This may fit Mr Oron’s “one-to-many node” maxim. It should certainly be viewed as the ideal manifestation of a virtuous circle.

For a novice business founder, it is difficult to overstate the value of a good mentor—a veteran entrepreneur acting as a personal adviser during the start-up’s early stages. A study of Silicon Valley Internet start-ups found that new businesses with helpful mentors experienced three and a half times more user growth and raised seven times more funding than those without such mentors1. In the EIU survey, mentoring is cited by Tel Aviv, San Francisco, London and Singapore entrepreneurs as the second-most valuable type of support they’ve received from other entrepreneurs when starting their business. (Number one on their list is business model advice—some of which is provided by mentors.)

Most accelerators present in start-up-friendly cities feature teams of experienced entrepreneurs serving as mentors, each of whom is typically paired with a fledgling business founder in the given programme. Effective mentoring relationships are those where the veteran entrepreneur regularly provides his or her protégé with a combination of practical counsel in areas such as marketing or recruiting, high-level input on growth strategies or the business model, as well as inspiration and emotional support to help get over setbacks. Introductions – to potential investors, customers and partners – are also usually part of the mix.

The practice of mentoring relationships is not widespread everywhere, however. Singapore aside, they appear to be less prominent features of support networks in Asian cities than in the West, judging by our survey results. Even in cities where mentors are used widely, far from all such relationships are successful. Why does mentoring play a larger role in some start-up ecosystems than in others? And what are the ingredients of a successful mentoring relationship?

Sharing and caring

Aspects of business culture may help explain why mentoring is less widespread in Asian cities than elsewhere. Tina Cheng, partner and chief Taiwan representative of Cherubic Ventures, says the lack of mentors is the biggest challenge facing entrepreneurs in the Internet and Technology, Media and Telecommunications (TMT) industries in Taipei. She attributes the shortfall to the fact that there are fewer people in the city who have “done it” in these industries– founded successful companies and then sold them on or gone public – compared to others. It’s a similar story in Hong Kong, according to Rachel Chan, founder of InnoFoco, a “network economy” consultancy. “There is very little history and experience with mentoring in Hong Kong,” she explains. “People with capital often work in ‘old industries’, and are not able to give useful advice to digital start-ups, which are a new phenomenon here.”

“There is very little history and experience with mentoring in Hong Kong.”

-Rachel Chan, founder of InnoFoco

Ms Cheng points to another inhibitor to mentoring in some Asian cities – a reluctance to share information – which will likely take time to break down. Her experience in the US is that start-ups happily share key details of the business, including existing and projected financials, with mentors, other advisers or partners. “Entrepreneurs here, by contrast, tend to be more cautious and protective of business information,” she says, sometimes due to a suspicion that someone could steal the start-up’s business idea rather than help them develop.

It’s a different situation in Tel Aviv – where mentoring is valued more highly by entrepreneurs than in any other city in our study. Roy Oron, CEO of SOSA, a start-up accelerator and entrepreneur community, believes this grows out of an Israeli business culture – particularly evident in the technology sector, he adds – in which people genuinely want to help each other. “Everyone pulls for each other to succeed,” says Mr Oron. “When you enter the ecosystem you don’t feel like you’re in a business environment; you’re in a family environment where people genuinely help each other.”

His view is echoed by Patricia Lahy-Engel, director of The Hive by Gvahim, an accelerator which caters to immigrants to Israel. It is an informal business culture, she says, in which entrepreneurs enjoy access to everyone, including CEOs of large companies. In such an environment it is not difficult for her or Mr Oron’s accelerator to find experienced entrepreneurs who are more than willing to volunteer their time to help new ones.

The right ingredients

Beyond having experience-based knowledge to impart, a hallmark of a successful mentor is commitment. One expert interviewed for this project complained that too many mentor networks built up by accelerators are loose and disorganised, with many of the veterans on the list being merely “on call” or there “for show”. Mr Oron agrees that many mentorship programmes are diluted with business people who are not genuinely committed. Good mentors are not easy to come by precisely because they are committed and thus extremely busy, he says. “I’d rather say no to 95% of the people that approach me to be a mentor because I cannot really commit to it,” says Mr Oron. The other 5% of cases, he explains, are those where he sees he has experience and contacts that can be of use to specific start-ups, and he will commit to making the time.

“When you enter the ecosystem you don’t feel like you’re in a business environment; you’re in a family environment where people genuinely help each other.”

-Roy Oron, CEO of SOSA

Mr Oron also believes it should be the mentor’s responsibility to drive the relationship, for example by dictating their schedule of meetings and setting agendas. “As a mentor you should be able to help a protege make leaps forward in the short bursts of time available. In those one or two-hour sessions, you should bump them up to the next step, give them the tools, give them the directions, give them the homework and then push them forward, always setting the next goal.”

Peter Boboff, general partner of Transmedia Capital, a San Francisco VC fund, believes the most successful relationships are those where mentors identify a couple of areas where their knowledge is more likely to have a big impact. Tech-sector start-ups, for example, are strong in technology but tend to lack business development nous. “Sales and marketing and large-company connections are tech ventures’ biggest voids in the early stages,” Mr Boboff observes. Therefore he and the mentors the company brings in often focus on shaping the start-up’s business development initiatives. Sometimes this involves making introductions to potential customers or even helping a start-up land its first big deal.

Time is needed for a good chemistry to develop between mentor and protégé, says Mr Boboff, but some quick wins are also needed to kick-start growth. “We have to move pretty fast to help them, because they’ve usually only got a year or so to advance to that next level.”

“The two most difficult challenges in starting a business are people and people.” This comment comes from Rachel Chan, founder of a consultancy which advises government agencies and start-ups in Hong Kong. It is a complaint echoed across several of the start-up hubs in this EIU study. It is also reflected in our survey, where entrepreneurs from Shanghai, Taipei, Seoul and San Francisco are especially vocal about the difficulties they experience in finding, and affording, skilled employees.

When filling talent gaps is of the essence, entrepreneur networks and communities prove their worth. Nearly one-quarter of Hong Kong entrepreneurs, for example, and one-fifth of those in Ho Chi Minh City, say such communities have given them valuable access to prospective employees. Word of mouth and peer referrals, it appears, are decisive factors when the talent hunt grows urgent.

The talent gap

Talent shortages in start-up-friendly cities are particularly acute in technology functions. In San Francisco, sales and marketing professionals are in reasonably good supply, says Peter Boboff, co-founder of Transmedia Capital, a venture fund. It’s software engineers and other technology specialists that are in the greatest demand, he says. The story is similar in Tel Aviv, according to Roy Oron, chief executive of SOSA, a start-up accelerator and self-styled innovators’ community. “The big gap is software developers,” he says, “and there is high demand also for big data and cyber-security specialists.” Israel’s defence sector helps meet some of these needs, Mr Oron says, but one speciality not well developed in the country is that of product specialists. Entrepreneurs in other cities report an acute need in start-ups for specialists with “user experience” expertise, which combines knowledge of IT with that of product design and customer interaction.

Such shortages are often a by-product of widespread start-up success: when new businesses are being founded daily and later-stage ventures are expanding, available specialists in IT, web development, data analysis and other areas are snapped up quickly.

In several cities there is stiff competition also from the technology giants located in the neighbourhood. Mr Boboff confirms this is the case in San Francisco as well as in Silicon Valley. It also applies in Asia. “The ability to hire top talent is a particular weakness in Hong Kong,” according to Simon Squibb, CEO of Nest, a venture capital firm. “Similar to Silicon Valley, the best people often take well-paid jobs with bigger firms, leaving smaller start-ups at a disadvantage,” he says. Esther Nguyen, co-founder of POPS Worldwide, a multimedia company based in Ho Chi Minh City, is another who laments that the best local talent usually work for multinationals.

Tapping up your communities

Amidst talent scarcity, entrepreneurs often turn to their personal connections and networks to get referrals to available specialists, or tips on where to look for them. Bryce Keane, a co-founder of 3beards, a London-based event organiser, reports that hiring needs are a frequent topic of discussion at the Friday evening “drinkabouts” it puts on for technology entrepreneurs. It’s not just community members who attend such get-togethers for this purpose, he adds. Representatives of older, larger Shoreditch ventures and sometimes large tech firms are often in attendance as well, on the lookout for talent. Similar to other community facilitators, 3beards also maintains a “job board” on its website where members post vacancies at their firms.

A dearth of software engineers and other technology specialists: the “biggest bottleneck” in Singapore’s start-up environment

-Global Startup Ecosystem Rankings 2015

When it comes to recruiting, as with most types of advice fledgling entrepreneurs seek, face-to-face discussions with peers at such community get-togethers are hard to beat. They are particularly important when start-ups are searching for senior managers. “When it comes to the crunch – I need top talent to fill senior roles, or I need money – those are face-to-face conversations,” says Lawrence Wintermeyer, CEO of Innovate Finance, a London-based fintech association.

But many other types of recruiting challenges are the focus of discussions in online networks. In Singapore, a dearth of software engineers and other technology specialists is the “biggest bottleneck” in the start-up environment, according to the Global Startup Ecosystem Rankings 2015. (Hiring a software engineer in Singapore takes 17% longer than in Silicon Valley and salaries are higher than everywhere else in Asia, the report authors say.) Rob Findlay, senior vice-president at DBS Bank and co-founder of Next Bank, a financial industry community, says that queries about where to find certain types of specialists are regular fare in WhatsApp and other social media groups where entrepreneurs in South-East Asia congregate.

Even when identified, interviewed and offered a position, the right people are often hard to reel in. For one thing, the salaries and benefits on offer at start-ups tend to be less attractive than what can be obtained at established companies, particularly if Google, Facebook, Amazon or other online behemoths have offices in the city. They may be unlikely to share details about their financial packages, but entrepreneurs will use their communities to discuss effective tactics for competing with large employers for talent – and for repelling attempts to poach their existing talent.

Help from City Hall?

On the surface there appears little that city governments can do to ease start-ups’ immediate hiring challenges. National authorities tend to pull the strings when it comes to making labour markets more flexible – easier access to visas, for example, would make a difference in cities (such as San Francisco and London) where native-born specialists are thin on the ground and foreign ones are consequently in high demand.

Some city initiatives, however, could have a direct and positive impact on start-up hiring in the medium term. Jessica Lin, community director at Work-Bench, a New York City VC fund, notes that one of City Hall’s most useful contributions to start-ups has been its efforts to expand the teaching of computer science in public schools. San Francisco is doing the same, as are other cities. The Singapore government, for instance, is launching elementary and high school programmes to build computational thinking. Should such initiatives bear fruit, start-ups will eventually have deeper local talent pools to select from. They will still need, however, to dive in before bigger corporate rivals drain them.

Recent Economist Intelligence Unit research highlighted the important role that informal entrepreneurial communities play in successful start-up ecosystems. In vibrant start-up hubs, seasoned business founders provide invaluable guidance to first-time founders, and all of them network avidly amongst themselves, sharing advice, making introductions and providing moral support for each other’s endeavours.

City or national governments seldom get involved in facilitating or sponsoring such informal activity. Yet a majority of entrepreneurs surveyed by the EIU say their government should do more to support entrepreneur communities. What role, then, should governments play? This begs the larger question of what are the most useful steps governments can take to help their start-up ecosystems thrive.

The direct approach

Providing funding is the most direct way that governments can help start-ups themselves, as well as the wider ecosystems, to grow. Tel Aviv, Santiago and Singapore were cited in the 2015 edition of “The Global Start-up Ecosystem Report”, published by Compass (formerly Startup Genome), for the effectiveness of their matching grants to venture capital funds and direct grants to start-ups.

These and other cities also sponsor or provide financial support to accelerators, incubators and other formal structures that help fledgling businesses get off the ground. Two good examples are found in London. TechCity UK and Innovate Finance, large associations supporting digital and fintech start-ups respectively, were both launched at the initiative of the UK Prime Minister and receive funding from the Treasury or other government departments. Both also receive support from the government of the City of London. Nick Hungerford, co-founder of UK fintech Nutmeg, which provides online wealth management advice, credits Innovate Finance along with the government and the industry regulator for nurturing an industry environment in which “we have a thriving range of firms, from investment to banking to payments, which are overturning established ways of doing things.”

The Singapore government’s approach to funding entrepreneurial support structures has also been effective, according to Grace Sai, co-founder and CEO of The Hub Singapore, one of the city’s first co-working spaces for technology start-ups. “The ‘spray and pray’ model of direct seed funding of start-ups by government agencies has not worked well, as the latter usually do not have an ear on the ground. What Singapore has at least done well is investing in incubators and accelerators that have the expertise of selecting, curating and doing capacity building for a select group of start-ups. It has more intention behind it, and those tend to bring better results.”

The Singapore government also runs accelerators itself and its success echoes Grace Sai. Alex Lin, Head of IIPL (Infocomm Investments Pte Ltd), cites the 8-fold increase in the success rate of start-ups that go through acceleration – from about 10% with just incubation, to 80% with acceleration before incubation. BASH (Build Amazing Start-ups Here), Singapore’s largest “integrated start-up space” (operated by IIPL), was created to house accelerators, incubation, start-ups and investors, and is a result of the government’s acceleration strategy launched in 2014. “This is a place bustling with energy and activity,” says Mr Lin. “On any day you might see pitch practice sessions happening at Brewery, the event space; investors having conversations with founders over coffee at the Chill area; and start-ups working on their products in Hatchery and Factory.”

Mr Leonard, Deputy Chairman of IDA, was recently appointed by Minister of Finance to be the founding CEO of SGInnovate. He emphasizes the importance of entrepreneurs in building informal communities and the facilitative role governments play in connecting these individuals with the larger community. SG Innovate, established by the government in April 2016, is itself designed to act as a facilitator for Singapore’s fintechs. Its brief includes matching fintech entrepreneurs with mentors and venture capitalists, and helping them to locate needed talent.

“Singapore has all the components of a vibrant innovation-led economy. We have a deep pool of investment capital, world-class scientific research, great institutions of higher learning, a huge base of businesses, and a stable and supportive government. However, for any innovation-led ecosystem to create real economic value, entrepreneurs are the catalysts. Our mission at SGInnovate is to be fully focused on helping entrepreneurs. We work with the most ambitious and capable women and men who want to build ‘deep-tech’ products that form the foundation of globally-relevant companies. We bring together all the parts of the domestic and international ecosystem.”

– Steve Leonard, Deputy Chairman of IMDA, founding CEO of SGInnovate

When it comes to informal communities themselves – the networks of entrepreneurs that form organically online or through periodic get-togethers – governments are advised to keep an arm’s length. Some entrepreneurs hold the view that government involvement of any kind increases formality and reduces spontaneity. Mr Hungerford believes most such communities in the UK for instance, would resist government involvement in their activities for fear of the financial or other strings that may come attached.

Ms Sai believes there is a positive that role governments can play in supporting communities, but it should be of an indirect, enabling nature. “It’s highly important in an ecosystem to have this group of community-builders, but at the same time they can’t find a business model to do it. Many of these people are facilitating these opportunities voluntarily, holding a full-time job, and so their impact is limited. So I can definitely see a role for government in seeding and enabling these community-builders to create a multiplier effect.” This might take the form, she says, of providing a small amount funding for a certain number of events per year, or providing the space to run them.

The light touch

It goes without saying that keeping bureaucratic red tape to a minimum significantly smooth the early path start-ups have to take. In the World Bank’s estimation, Singapore and its regional neighbour Hong Kong have made concerted efforts in recent years to simplify the process of registering a business. “In Singapore we can set up a company within five minutes and everything can be done online,” says Ms Sai. “In some other countries you need three months.” It may be no accident that Singapore and other countries with active start-up hubs such as the US, UK and South Korea all figure in the top ten of the World Bank’s “Doing Business” ranking of 189 nations.

Notwithstanding Singapore’s progress, Mr Leonard concedes that start-ups sometimes too often fail to understand government requirements or standards that need to be met in areas such as registration or reporting. “Start-ups may not understand the need for these, in which case they feel that the whole process becomes very challenging.” A government response to this, in the financial sector, is the establishment of the FinTech Office, which Mr Leonard calls “a one-stop virtual platform to help start-ups navigate the intricacies of the government.”

Attention to infrastructure

Arguably the most valuable contribution government can make to the start-up ecosystem is ensuring that the infrastructure is in place which supports businesses of all sizes. Given the increasingly digital nature of business today, reliable high-speed broadband networks are now an essential rather than desirable component of physical infrastructure and just as important as transport and energy supply.

Talent pools and education are the other elements of infrastructure that matter vitally to businesses, and are within the power of city and national governments to influence. Entrepreneurs in most of the cities in the EIU study complained of talent shortages, and Singapore is no exception. Attracting skilled people pose different challenges to a business and a city government, according to Mr Hungerford. “It’s the responsibility of the founders to make sure that the team and vision are compelling, and the responsibility of the city government to make sure the location is compelling.” There is a great deal that governments can do in this direction, he says. For example, adequate broadband, affordable housing and cultural diversity are features that make cities attractive to young talent today. He adds that well-conceived visa regimes can also help alleviate talent shortages.

Ms Sai suggests a similar approach for Singapore, maintaining its attractiveness with ease of immigration and work permit approvals to garner the right talent. Long-term considerations in education policies are also important to equip young students with the right digital and future-ready skills to increase start-up talent within the city. “I do think we lack the computer science knowledge, but I know the government has been doing their best to bring coding workshops in. The long-term idea should be to introduce computer science and programming in schools. Coding is like Chinese – it’s another language that one has to learn for the future.”

The Singaporean government has indeed been taking initiatives to address the gaps in technology education, as well as to match budding tech talent with the start-ups who need them. These include “finishing schools” for technology students. An example is AlphaCamp, which not provides education in technology subjects but also seeks to familiarise students with the fast-paced and risk-friendly culture of start-ups. Another is the Code@SG movement launched by IDA and the Ministry of Education; it’s objective, in Mr Leonard’s words, is to “teach the important skills of coding and computational thinking in a fun way to all Singaporeans such that it becomes a national capability.”

The art of enabling entrepreneurs

City governments have taken concerted actions over the past several years to create a supportive environment for start-ups in technology and other fields. The Singapore government’s funding of nascent entrepreneurs, incubators and even maintaining a competitive business environment in the city has enabled a thriving start-up scene. As Grace Sai mentions, “everywhere but Silicon Valley wants to be like us”.

Nonetheless governments must recognize that the vibrancy of an ecosystem also rests on foundations that can only grow organically. Governments of cities, regions and countries that hope to nurture a start-up ecosystem must be able to strike the right balance between different forms of support to its stakeholders, whether direct assistance, indirect encouragement or gentle nudging. Understanding when it is best to stand aside and let grass-roots initiatives blossom is key. Start-up cities, after all, are only as successful as their individual entrepreneurs.

City Focus

Ho Chi Minh City has been an entrepreneurial hotspot for as long as anyone can remember. When the city was officially known as Saigon merchants lined the main streets to sell their goods and this spirit continues today: from small vendors to big ventures. “Ho Chi Minh City is a nirvana for entrepreneurship,” says Chad Ovel, a partner at Mekong Capital, one of the city’s largest private equity firms. “In Vietnamese culture it is less shameful to have started a business and lost their full investment, than never having tried.”

In the EIU survey of entrepreneurs one-third (33%) said it was easy for them to start their business in the Ho Chi Minh City, which is tied for the highest figure in Asia (with Singapore) and second amongst the ten cities globally, trailing only London. “There are a lot of opportunities,” explains Mr Ovel. He says local consumers embrace entrepreneurship and with the median age in the country being 28 years, they are also willing to embrace new ideas and products. Per capita income is also rising rapidly (reaching US$5,100 in 2014) with annual GDP growth in the city at about 10%, figures which help explain growing consumer demand.1

An informal environment

Formal structures such as private equity funds target bigger investments. Mekong Capital, for instance, focus mainly on deals above US$8m. As a result local entrepreneurs typically have to rely on raising money from friends and family below that amount. This has traditionally created a gap for entrepreneurs in which it is hard to raise capital in between what the family has and what venture capital companies want to invest. Although, in the past 1-2 years, a number of venture capital funds have been launched that have lower minimum investment thresholds such as between US$100,000 and US$500,000, this gap was reflected in the survey: lack of financing is the biggest challenge in starting a business in Ho Chi Minh City and is tied with Tel Aviv as the highest globally (cited by 55% of survey takers in Ho Chi Minh City compared to the global average of 46%).

Therefore, culture may be changing but entrepreneurs in the past typically had to rely on friends and family. Esther Nguyen, a Vietnamese-American and CEO and co-founder of POPS Worldwide, a Ho Chi Minh City based multimedia company that aggregates and distributes Vietnamese content, raised US$200,000 in 2007 from acquaintances in the United States to start her company. “Back then there was no support besides family and friends,” says Ms Nguyen. Now, however, there are informal opportunities in the form of co-working spaces, Facebook groups, and other various networks in the city.

One of them is WORK Saigon, a co-working space, creativity school, and cafeteria, run by co-founders Tuan Le and Laure Chevallier. In typical fashion here, they got funding from their families and had little support outside of their personal networks to start their business. Now they are helping others. A seminar on entrepreneurship they hosted was such a success that it has now turned into a semi-formal event, which has been held nine times. “You have to be generous with your time and skills,” says Mr Le. “If you help them then they will help you.”

Indeed, other entrepreneurs were deemed “very important” to a greater extent in Ho Chi Minh City (27%) than in all other cities surveyed save for San Francisco and New York. Mr Le says WORK Saigon attracts between 75 and 100 customers a day during the peak with the majority working in e-commerce, design and marketing.

Networking go-getters

Global online networking is used far more in Ho Chi Minh City (70%) than the worldwide average (58%), and trailing only San Francisco globally in this regard, perhaps due to English being relatively widely spoken, especially compared to other Asian cities. Following from this, global online networking was deemed the most helpful when starting a business in Ho Chi Minh City (48% vs 39% globally). Mr Le says online networking in Ho Chi Minh City have exploded in recent years and is seen as complimentary to traditional networking.

“In Ho Chi Minh City, network aggressively and ask great questions to everyone you meet. You don’t know all the answers so constantly network and learn from people.”

– Chad Ovel, a partner at Mekong Capital

In fact, physical networking is also viewed favourably in the city. In particular, business and industry associations were deemed far more “very important” in Ho Chi Minh City (cited by 35%) than in all other cities except for New York (and tied with San Francisco for second). “In Ho Chi Minh City, network aggressively and ask great questions to everyone you meet,” advises Mr Ovel. “You don’t know all the answers so constantly network and learn from people.” He finds that companies with inquisitive CEOs go further. This is reinforced by the EIU survey which found that support received on business models were a particularly strong sentiment in Ho Chi Minh City (55%) compared with global figures (42%).

Changes afoot

Given its fast growth rate and demographics, the entrepreneurial environment in Ho Chi Minh City is changing rapidly. “Vietnamese people educated abroad are coming back and kids now grow up with technology tools and cool coffee shops,” says Mr Le. This can be illustrated in part through the mobile phone penetration in the country, which is among the highest in the world and at 147 mobile cellular subscriptions (per 100 people) is at the same level as Singapore.2

One challenge for entrepreneurs, however, is building a corporate culture and attracting talent when facing limited resources. The best talent work for multinational corporations in which they have a specific role and if they leave for a start-up company they are often not used to working in such an environment. But this is also changing rapidly. “The level of creativity is definitely increasing,” observes Ms Nguyen, a statement with which Mr Ovel—a 20 year expat here—agrees with.

One thing that probably won’t change is the lack of formal support: about 4 in 10 (38%) respondents in Ho Chi Minh City say the informal entrepreneurial environment will be “very important” in three years, the highest in all of our 10 cities surveyed, and compared with a global average of 24%. No survey taker in Ho Chi Minh thought it would be “unimportant”. One reason is the creativity of the informal eco-system in Ho Chi Minh City. Besides co-working spaces and online activity, groups such as the Vietnam Angel Network (VAN), a recently launched “club” of about 50 high net worth individuals who share deals and opportunities, typify the entrepreneurial spirit that began when merchants started lining the streets of Saigon.

Hong Kong has a rich tradition as a trading hub with its port being ranked as the world’s fourth busiest by container volume according to the most recent data1.

It has not, however, been known as a centre for innovation, although this sentiment might be changing. “In the 21st century, Hong Kong needs to create value with technology, intellectual property, and content to remain globally competitive,” observes Rachel Chan, founder and Chief Catalyst of InnoFoco, a self-described network economy consultancy, which works with government agencies and fast-growing start-ups.

The data supports her analysis: in a recent global survey Hong Kong rated as one of the top five fastest growing entrepreneurial ecosystems in the world.2 In the World Bank’s Doing Business report, Hong Kong ranks fourth globally in starting a business and fifth overall in terms of ease of doing business.3

Another reason, according to our survey, is that Hong Kong is a hub for financing, which is the biggest challenge in starting a business globally (cited by 46%) but less of an issue here (38%) in part due to its large stock market and financial services industry. Hong Kong also has the added benefits of its proximity to mainland China and is positioning itself as “Asia’s world city”. “You have all the benefits of China and of the West,” says Simon Squibb, the founder & chairman of Nest, a global venture capital company. “Good rule of law, it is easy and cheap to set up a company, and you have access to financing.”

A missing piece

Lack of government support is cited in the EIU survey as the second greatest challenge globally (39%) for entrepreneurs and this is especially prominent in Hong Kong (58%), which rates highest in this category among all cities. Add to this that respondents also say that government support for entrepreneurial communities is particularly insufficient in Hong Kong (84%) compared to the global average (72%). To bolster the innovation ecosystem, the government has launched a few programmes including support for early-stage funding and innovation hubs, such as Cyberport and the Hong Kong Science & Technology Parks Corporation; however, there is a sentiment that what is being done is not enough.

The government can do more to encourage young companies,” observes Ms Chan.
She cites as an example procurement where most of the contracts are now awarded to the bigger players. As a result it is not unusual that smaller start-ups have to rely on orders from outside of Hong Kong until they grow large enough to compete locally. Ms Chan attributes this to the fact that the Hong Kong government, compared to some others, is too cautious in trying innovative solutions from startups with no track record. The EIU survey supports this statement: only 7% of Hong Kong entrepreneurs say their government is “very effective” in supporting entrepreneurship compared to an average of 15% globally.

The gap is partially filled by its strong financial services sector andactive investors. One of them is Mr Squibb who founded Nest in 2010. After having travelled the world for a year to tour all known—and some lesser known—hubs for innovation he spotted a gap in the market: there were very few global venture capital companies. Although Nest has an “Asia first” strategy the company has pursued this plan and now have eight offices around the world, although its headquarters are in Hong Kong. “What I realised is that every ecosystem has its strengths and weaknesses,” says Mr Squibb. “Because there is no perfect place, what we do is to leverage relative strengths by thinking global and acting local.”

Co-working and networking

Locally, the informal community also plays a part in addressing the city’s deficiencies. One particular challenge in Hong Kong is rent. In the Worldwide Cost of Living 2016 report from The Economist Intelligence Unit, Hong Kong is tied for second as the most expensive city in the world to live, which not only affect would-be entrepreneurs but also the potential for recruiting staff. High prices also apply to office space. “This is where co-working spaces really help start-ups and that’s one reason they have exploded in recent years,” says Mr Squibb. The number of co-working spaces in the city is anecdotally more than 50 as entrepreneurs take advantage of shared office costs.

Hong Kong’s high office prices affect would-be entrepreneurs, but “this is where co-working spaces really help start-ups and that’s one reason they have exploded in recent years.”

– Simon Squibb, the CEO of Nest (Singapore)

Another booming informal community in the city is global online networking which is far more common in Hong Kong (67%) than the global average (58%), in part likely due to the level of English capability here and the potential benefits it brings to those who can take advantage of them. “These days online networking is very important,” says Ms Chan. “I see entrepreneurs using Kickstarter to raise funds and LinkedIn as an easy way to try and get an introduction.”

As a result, far more respondents in Hong Kong (74%) say the entrepreneurial communities in their city are mainly unstructured: i.e. groups or activities without formal objectives than the global average (54%). Ms Chan, for instance, says she received no formal support when she started InnoFoco in 2008. Instead she relied on business contacts and friends for advice.

Looking ahead

Given the current environment, it is surprising that only 13% of survey takers in Hong Kong say the informal environment will be “very important” three years now, a much lower figure than the global average (24%) and second only to Seoul (9%) in this regard.

One reason could be that these informal networks are developing into formal ones. Mr Squibb, for example, is trying to achieve the best of both worlds as his company has just launched a platform that combines informal online and formal offline networking in which entrepreneurs can help other entrepreneurs. His own best piece of advice is to ask “why” someone wants to start a business. “You have to ask why you do it and not many people can answer that,” he says. “If you don’t have a “why” then you just do it for the money instead of having a passion for it.”

London is by most accounts a thriving start-up city. “There’s never been a better time to start a new business in this city,” says Alice Bentinck, a co-founder of Entrepreneur First, an accelerator. “Over the last four or five years it has become very start-up-friendly. I don’t know what ‘easier’ would look like.”

Ms Bentinck’s assertion is backed up by some substantive research. London ranks sixth in the 2015 Startup Ecosystem Ranking, a global table published annually, and first in the European Digital City Index1. In the EIU survey, 35% of London entrepreneurs rate their city as “easy” or “very easy” to launch a business in, the highest figure among the 10 world cities covered. It is widely recognised as one of the world’s fintech capitals, and is home to Europe’s most recognisable tech start-up “neighbourhood” – Shoreditch, also known as “Silicon Roundabout”.

Government and regulators come in for high praise for creating an environment in which start-ups can thrive. “London has the blueprint for a highly innovative, vibrant fintech hub,” says Lawrence Wintermeyer, chief executive of Innovate Finance, an association serving the fintech industry. “That’s thanks to having a proactive and digitally astute government and industry regulator,” he adds. Ms Bentinck agrees: “The government has made it very easy. Tax breaks, for example, have led to a flow of cash, and the legal process for start-ups is straightforward.” The survey respondents agree, too: 57% believe government is “somewhat” or “very” effective in supporting entrepreneurial activity in the city.

A city of communities

London is well-stocked with support structures of various types that serve entrepreneur needs for assistance. Tech City UK and Innovate Finance are two of the largest not-for-profit, “full service” support organisations, offering accelerator programmes, training courses, events and investor services. (Both were established with direct or indirect government sponsorship.)

Other prominent organisations supporting start-ups and scale-ups in similar ways include Barclays Accelerator, Level 39, Oxygen and the London chapters of global accelerators Techstars, Startupbootcamp and Seedcamp. Entrepreneur First, unlike other accelerators which support existing companies, focuses on technology graduates looking to establish start-ups around their specific concepts.

But London is also a hotbed of informal entrepreneur networks. “The sheer number and energy of communities never cease to amaze me,” says Mr Wintermeyer. “There are a number of formal fintech events every day in London, in addition to all the informal events being held.”

Over half of survey respondents – 55% – report that activities organised by entrepreneur communities were important sources of support when they started their business. Another 49% say the same about meeting other entrepreneurs in informal communities. Such communities were more important than banks, business associations, incubators or accelerators in helping new business founders get started.

Socially minded

Some of these entrepreneurs may have attended a “Silicon Drinkabout”. This is a Friday evening get-together at a Shoreditch or other East London bar hosted by 3beards, an events company which started life as a small circle of friends organising such activities for fun when away from their day jobs. It has grown into a commercial organisation which, through affiliates, runs “drinkabouts” in 17 cities in Europe, North America, Latin America and Asia.

Bryce Keane, a 3beards co-founder, explains the ethos of “drinkabouts” and similar community activities taking place around London for technology entrepreneurs: “if you’re spending 70 hours a week at your start-up looking at the same two or three people each day, you want to spend Friday night meeting and talking with someone new. People need to share their experiences in person to feel like their part of something, to feel like their part of an ecosystem.”

“People need to share their experiences in person to feel like their part of something, to feel like their part of an ecosystem.”

– Bryce Keane, a 3beards co-founder

According to Mr Keane, those who come share “war stories” about red tape, technology problems, marketing challenges and other practical issues. Some attend to search for talent, he says. “Small and midsize Shoreditch firms without Google-size HR budgets often use such meet-ups or our jobs board to find, or get pointed to, skilled people.” Other events involve talks by prominent tech entrepreneurs followed by Q&A sessions, and product demos by start-ups where the audience is invited to provide feedback.

A more exclusive community is ICE – the International Conclave of Entrepreneurs. It started in 2009 as an email list of like-minded entrepreneurs, and now also organises physical events for its members such as weekend trips. It today numbers 200 start-up founders and investors but membership is tightly controlled. The online forum remains an important part of its activity, a digital space where members both obtain practical advice about operational issues and share experiences about higher level issues such as dealing with potential investors.

Online forms of networking indeed play an important role for London entrepreneurs. Those in the survey are avid networkers. Over half (55%), for example, regularly get advice and share experiences on global platforms such as Facebook or LinkedIn. When starting their businesses, these were by far the most frequently utilised types of networking, as well as the most useful, respondents say.

Other popular entrepreneur communities, most of which facilitate both online and offline networking, include TechHub and London Enterprise Tech Meetup, both of which focus on the technology sector, as well as Collider, an accelerator which is dedicated to marketing and advertising start-ups. There is also Startup Grind as well as Google Campus, which caters to tech start-ups in various sectors.

Collider’s inclusion in this list reflects the fact that accelerators and other more formal support structures facilitate communities of their own. Entrepreneur First, says Ms Bentinck, straddles the formal and informal in the types of activities it organises. “The 12-month programme is the formal part, but when our entrepreneurs leave they become part of an informal alumni network. This community is entirely informal – helping each other through their own connections.”

London’s formal and informal entrepreneur support structures complement, rather than compete with, one another. They sometimes also collaborate, recognising each other’s unique strengths. According to Mr Wintermeyer, this is part of what makes London’s start-up scene so vibrant.

1. The inaugural EDCI was published in 2015 by Nesta, a UK not-for-profit organisation which promotes entrepreneurship and innovation, on behalf of the European Digital Forum think tank.

New York City may be harbouring something unusual given its bold Big Apple persona—an inferiority complex. Personalities in the city’s start-up scene chafe at the perception that it is second to Silicon Valley as a tech start-up hub. Sharon Klapka, chairwoman of New York Hearts Tech, a community supporting “fashion-tech” and “lifestyle-tech” start-ups, maintains that the city is the mecca of e-commerce and not getting the credit for it. “New York is not second tier to anyone,” she says. “It’s the frontrunner when it comes to innovation and disruption in e-commerce.”

The publishers of the 2015 Startup Ecosystem Ranking share the view of New York as an entrepreneur-friendly city, placing it second in the world in its table (although again behind Silicon Valley). Just under one-third (32%) of entrepreneurs in the EIU survey say it was easy for them to start their business in the city, comparable to the “easy” ratings provided by their counterparts in London in San Francisco, and higher than the others.

All-tech

Formal structures such as accelerators and incubators, as well as VC funds, play an important role in helping New York start-ups get off the ground. A few dozen or more accelerators – prominent ones include Techstars, Entrepreneurs Roundtable Accelerator and AngelPad – provide structured development programmes, usually with equity commitments. Many of these facilitate communities as well.

Jessica Lin, community director at Work-Bench, a VC fund, believes New York is distinct from other start-up hubs in the plethora of accelerators, venture funds and communities it has operating in many different sectors, not just IT and and consumertech. Fintech, healthcare, biotech and media are well-represented, for example. So are fashion and education.

Local entrepreneurs in the survey have an extremely favourable view of the role such communities play in the city, 84% asserting that they “stimulate a culture of innovation”. The respondents are amongst the most active networkers in the 10 cities in our study. This is especially the case when it comes to physical networking – meeting peers face-to-face. For example, nearly half the respondents – 49%, the highest figure in the survey — take part in six or more “happy hours” or other get-togethers organised by supranational groups such as university alumni associations.

Meeting other entrepreneurs in informal communities and activities has proven to be the most important source of support to new business founders. This is the view of 70% of New York respondents, more than those who cite banks, business associations, accelerators or incubators in the same vein.

New York Hearts Tech was recently founded to serve as a forum for the city’s legion of small e-commerce businesses in the fashion industry. Its mission is partly evangelical, acknowledges Ms Klapka, arguing that the vitality of start-up activity in these verticals needs to be showcased. The other major part is the community, she says. Company founders and other senior managers get together over lunch or dinner, where around the table they make connections, share experiences and get advice on such practical questions as how best to design a showroom or what marketing platforms to use.

Online or offline?

Online communities form part of this informal support environment. Groups on big social media platforms such as Facebook and LinkedIn are frequented by up to two-thirds of them, while 54% – more than in all but one city in the study – also take part in locally oriented online groups.

Social media communities are useful, believes Ms Klapka, but mainly as a complement to in-person networking. Ms Lin agrees: “The most successful sharing and learning still happens over lunch or beer or a combination of both.” Both maintain that entrepreneurs only gain value from virtual networking groups once they have already established a face-to-face connection. “I’m not going to share any valuable insights in an online group unless I’ve met these people in person,” says Ms Klapka.

“The most successful sharing and learning still happens over lunch or beer or a combination of both.”

– Jessica Lin, director of community at Work-Bench

Work-Bench facilitates one of New York’s popular tech sector communities, the New York Enterprise Tech Meetup. Launched in 2012 by Jonathan Lehr, then working in the office of the CIO at Morgan Stanley (and now Work-Bench’s managing director), the community has over 4,300 members. It organises monthly meetup events where different entrepreneurs give talks, demo their products or concepts, and simply socialise. Work-Bench also organises regular lunches where a CIO or other senior executive of a corporate will discuss with start-up founders how, for example, to navigate procurement at a large firm. “These are meaningful discussions that you won’t get anywhere else,” says Ms Lin. “They won’t happen in a Facebook or LinkedIn group. A lot of relationships have come out of some of these lunches and conversations, and our entrepreneurs can build from there.”

Community activities, especially in-person get-togethers, also serve the perhaps less practical but no less important purpose of garnering emotional support. Fear of failure is cited by survey respondents as the most daunting challenge facing a new business founder in New York, after the need to obtain funding and ahead of other tough hurdles such navigating regulatory issues and hiring scarce talent. Conversing with people who’ve been through the same experiences before and overcome the hurdles can do much to bolster the spirit.

It also helps, believes Ms Klapka, if communities embrace leaders of young companies at different stages. “If everyone’s at the start-up stage,” she says, “the sharing of useful experience and actionable advice tends to be limited. If other people are there at later stages who’ve addressed issues the others are encountering now, that’s incredibly useful.”

Can government help?

Over half the survey respondents (57%) say that City Hall’s efforts to promote entrepreneurship in New York have been effective. But many more say that government support for entrepreneur communities is inadequate and should be expanded. Ms Lin recognises that the government is taking useful initiatives to boost computer sciences education, and more broadly that its support has contributed to the growth of the city’s technology ecosystem. Neither her group nor Ms Klapka’s, however, have been recipients of direct municipal or other government support. Neither feel a need for it. Their and other communities seem to operate well enough on their own.

As an environment for start-ups, San Francisco has traditionally stood in the shadow of nearby Silicon Valley, long considered the world’s technology innovation mecca. The city’s entrepreneurial ecosystem – not least its thick network of venture capital (VC) funds — has unquestionably been influenced by the Valley. (Some consider the city to be Silicon Valley’s “northern hub”1.) San Francisco, however, has an entrepreneurial dynamic of its own.

In recent years, a number of large technology companies such as Facebook, Twitter, Airbnb and Uber have sited their main offices in the city, partly attracted by an abundance of young technology talent. But San Francisco is also starting to rival Silicon Valley as a start-up hub, in the view of some experts. Peter Boboff, for example, co-founder of Transmedia Capital, a VC fund, states that “San Francisco is now the main attraction in the Bay Area.” New entrepreneurs, he says, may develop their business ideas somewhere in Silicon Valley, near their previous employers, or at a Bay Area incubator, “but when they’re ready to press ‘play’, they want to be in the city. They come here because they are typically young and the city is an exciting place to be.”

Accelerator City

San Francisco houses the largest concentration of accelerators in the US. According to a recent study from the Brookings Institution, the Bay Area (including Oakland and Hayward) sprouted 34 accelerators in the ten years to 2015, more than double the next highest figure of 13 registered by the San Jose-Sunnyvale-Santa Clara region (the core of Silicon Valley) and by Greater New York2. San Francisco is home to some of the oldest and largest of them, including 500 Startups and AngelPad.

Judging by the EIU survey, accelerators and other formal support structures, such as incubators and business associations, have been important sources of support to entrepreneurs when starting their ventures. Meeting fellow entrepreneurs in more informal settings, however, through meet-up groups, at happy hours or in online communities, have been nearly as influential. Such networks and activities are widely used by San Francisco entrepreneurs. For example three-quarters of them (76%) are hooked into entrepreneur-oriented social networking groups on global platforms such as Facebook or LinkedIn – much more than in other cities surveyed. Four in ten (41%) also connect with entrepreneurs in locally oriented social networks.

Steve Hoffman, who describes himself as the “captain” of Founder Space, one of the city’s prominent incubators, confirms that local entrepreneurs are keen networkers online. He explains the attraction: “You can get a lot of feedback online from a lot of people who you might never bump into or who might never go out but have a lot of knowledge. You’ll also often get a much deeper answer to your question online because somebody will have thought it through or offer links to other resources, which you can’t always get at a networking event or a panel.”

Mr Hoffman adds, however, that going online is no substitute for physical networking. “Entrepreneurs really want to meet face-to-face with other entrepreneurs.” The survey also suggests that online interaction is a complement to some very active physical networking in the city. Nearly half of San Francisco respondents (47%), for example, attend happy hours and similar get-togethers organised by supra-national groups, such as international alumni associations. “There are countless numbers of events and meetings held for entrepreneurs in this city,” observes Mr Boboff. But this activity can also be extremely informal. “Business people frequently meet each other socially in bars, and they meet with investors in cafes. There’s a pitch going on in just about every coffee shop you walk into,” he says.

“Business people frequently meet each other socially in bars, and they meet with investors in cafes. There’s a pitch going on in just about every coffee shop you walk into.”-Peter Boboff, co-founder of Transmedia Capital

Founder Space organises multiple events each month dedicated to different topics, such as marketing, finding talent or for the purpose of pitching to investors. (“If there’s a venture capitalist in the room you’ll get quadruple the turnout,” says Mr Hoffman.) Weekly or monthly meetings on different start-up-related topics are organised by such groups as Funders and Founders, Hackers and Founders, Startup Grind, SF Beta, 106 Miles and others. Some are specific to San Francisco whereas others, such as Startup Grind and Hackers and Founders, originated in Silicon Valley and now operate nationwide or globally.

Keeping focussed and smart

New entrepreneurs in other cities complain of some difficulty in finding or accessing the communities that may be of use to them. This is less the case in San Francisco. Both our interviewees say it is relatively easy to learn about the meetings and other networks on offer for a new entrepreneur, particularly if the start-up is in the technology sector. The bigger issue, in Mr Boboff’s view, is maintaining focus. “You have to pick your battles if you’re a young entrepreneur coming into the city,” he says. “You can spend a lot of time meeting a lot of people but they are not necessarily the ones who are going to get you the advice you need.”

Knowing how to apply the large amounts of information one obtains from such activities is another challenge, according to Mr Hoffman. “People get a lot of little pieces which can be valuable,” he says, “especially for very savvy entrepreneurs who can connect all the dots. Panel discussions, meet-up groups and online forums are very useful for getting an overview on an issue, but young start-up founders often don’t know how to apply such information to their business. That’s a big gap that communities today don’t necessarily address.”

“Panel discussions, meet-up groups and online forums are very useful for getting an overview on an issue, but young start-up founders often don’t know how to apply such information to their business. -Steve Hoffman, Founder Space

This, says Mr Hoffman, is where the more intensive programmes provided by the city’s multitude of accelerators and incubators make the difference. Beyond providing contacts and strategic advice, mentors and other advisers help new founders apply the knowledge gained in communities to their specific business challenges. Structured programmes and informal communities are best viewed as complementing, rather than substituting for, one another.

Seoul’s Gangnam district – made famous globally by K-pop rapper Psy whose “Gangnam Style” video has been seen more than any other on YouTube with over 2.5 billion views – is also a hotspot for start-up businesses. “It’s a mix of San Francisco and New York City,” explains Jung-hee Ryu, CEO of FuturePlay, a local venture capital firm. “It has the best of both, a large engineering community combined with a strong cultural environment.” This has created an atmosphere where technology entrepreneurship in particular is considered very trendy.

It has also contributed to a culture of information sharing among entrepreneurs. “Seoul is unique because as opposed to many other Asian cities there is a culture where successful entrepreneurs help others and often become investors,” explains Mr Ryu, citing himself as evidence. He sold his company to Intel in 2012 and after a two-year stint with the American technology giant decided to start FuturePlay to help others. “I believe many Korean technology start-ups can be sold to Silicon Valley,” he asserts. “Seoul engineers are very talented but the problem is that they don’t know how to be entrepreneurs.” It simply boils down to the lack of an entrepreneurial culture historically, which means that many find it difficult to start a business because there is no tradition of doing it.

“Seoul engineers are very talented but the problem is that they don’t know how to be entrepreneurs.”

-Jung-hee Ryu, CEO of FuturePlay

The EIU survey bears this out: only about 1 in 10 survey takers (11%) in Seoul said it was easy to start a business in the city, compared with a global average of about one-quarter (26%) who said the same about their cities.

Nowhere to turn

The Korean government has strongly supported technology and R&D development since the 1950s and in the past three decades has also focused on building out information infrastructure, such as broadband connectivity in which the country is amongst global leaders both in terms of penetration, speed and affordability. This has created a world-class enabling environment; however, much of the money has either been spent on pure infrastructure or found its way into one of the country’s chaebols, which are dominant conglomerates such as Samsung, LG and SK Group. “There is a disconnect,” observes Sean Lee, co-founder of Seoul Space, a Gangnam “hub” that serves as a co-working space, incubator, accelerator and information centre for entrepreneurs. “There is very little money available in the start-up ecosystem because access to government programs is often limited to a handful of companies.”

Only 4% of respondents in Seoul said their government is “very effective” in supporting entrepreneurs compared to an average of 15% among global entrepreneurs.

This sentiment is reflected in the survey. Only 4% of respondents in Seoul said their government is “very effective” in supporting entrepreneurs compared to an average of 15% among global entrepreneurs. Similarly, business and industry associations are deemed far less “very important” in Seoul (7%) when compared globally (25%) as are incubators and accelerators (8% vs 24%).

Seoul Space is one organisation that tries to bridge the gap. “We all recognised this is chaebol country and that start-ups are at a disadvantage,” says Mr Lee. “We want to help start-ups get a piece of the pie.” While working at one of the chaebols in 2009, Mr Lee and three of his would-be co-founders realised that entrepreneurs in Seoul needed help. They are an eclectic mix that had met at events where they had pitched different business ideas but they turned out to be a natural fit because Mr Lee knew how to build a website; another co-founder worked in real estate; one for a technology company and one was well-connected.

Linguistic barriers

Seoul Space caters to both expats and locals, albeit for the same reason: access to information. Expats often struggle with the fact that everything is in Korean. Meanwhile local entrepreneurs find it hard to grow their business outside of the peninsula. “All the content created is in Korean and we provide a type of bridge to the world,” says Mr Lee, who as an American-Korean is fluent in both languages. As an example, he says many innovative Seoul entrepreneurs would like to raise money on Kickstarter, the global fundraising platform, but they are unable to because of linguistic barriers.

Indicative of this, the EIU survey shows that when starting their business, it was much less common for entrepreneurs from Seoul (16%) to engage in global online networking than the global average (48%). Local versions supplement this deficiency but they lack the global benefits of international platforms. For instance, there are equivalents to Kickstarter in Korea but since they are based solely on the domestic market, there are typically not enough users and large enough amounts of money to be able to fund initiatives.

As a result, Mr Lee considers the informal environment for entrepreneurs to be very important. Seoul Space is trying to capitalise on this notion by turning them into formal ones. Once a quarter the “hub” organises an event, often sponsored by a big company, to engage local entrepreneurs. Stemming from a lack of information from other sources they can attract anywhere between 300 to more than 1,000 people.

A changing culture?

The promises of the Gangnam district apart, Seoul and Korea generally, still face socio-cultural challenges when it comes to entrepreneurship. One is that large domestic actors don’t acquire local start-ups. Another is the traditional belief that working for a bigger company is better. “The biggest challenge for entrepreneurs is still stigma,” says Mr Lee. “Your family expects you to work for a chaebol and if you don’t they will ask why.” This might be one reason that Seoul has the fewest percentage of young entrepreneurs, ages 18 to 35, in the survey sample (8%) compared to the global average (47%).

Although Mr Ryu agrees with this sentiment he says it might be changing. “Only five years ago, this was the case but people now see large companies losing market share globally and a lot of young people now want to run their own company.” Hence, a cool start-up culture might have manifested itself in Seoul, Gangnam Style.

Lack of government support is cited as the second-greatest challenge to entrepreneurs globally but it is not an issue in Shanghai. In fact, 85% of the city’s entrepreneurs deem their government “very or somewhat effective,” by far the highest figure globally. “It’s pretty simple,” says William Bao Bean, Partner at SOSV and managing director of Chinaccelerator, a global venture capital firm and China based accelerator. “In China, government support is local and a way to build a tax base.” He considers Shanghai to be among the most aggressive in Asia. No wonder: in April 2016 the local government announced new regulations that will cover up to RMB6m of venture capital losses in case of a bad investment.1

Although growth has slowed, China is still booming by international standards with GDP increasing at about 6.7% in the first quarter of 2016 and Shanghai offering some advantages compared to other cities in the country.2 “It is more international than Beijing,” says Mr Bean. For this reason, many companies opt to place their marketing and sales departments in the city and foreign brands often establish their headquarters here. Beijing is home to the majority of R&D initiatives and large domestic players, such as Baidu, Tencent and Alibaba, which means the ecosystem is just stronger there overall. “The reason we chose Shanghai,” says Mr Bean, who runs a tech-focused US$200m fund, “is that it is the most international city in China, both in terms of the level of English spoken but also because our focus is to help Chinese companies go global.”

“The reason we chose Shanghai, says Mr Bean, who runs a tech-focused US$200m fund, “is that it is the most international city in China, both in terms of the level of English spoken but also because our focus is to help Chinese companies go global.”

– William Bao Bean, Partner at SOSV and managing director of Chinaccelerator/SOS ventures

Strong government influences

Government agencies/departments were cited as “very important” more frequently in Shanghai (29%) compared to the global average (22%) and far more respondents (75%) say their entrepreneurial communities are mainly structured: i.e. formal groups having clear objectives, with regular events and programmes, than the global average (70%). Mr Bean estimates there are more than two thousand incubators in the country; however, there are only a handful of accelerators. Accelerators rely on mentors who volunteer for free and Chinese people don’t mentor for free. SOSV relies primarily on international and overseas Chinese returnees as volunteer mentors in its programmes, such as those offered by Chinaccelerator in Shanghai and HAX in Shenzhen.

One beneficiary [of Chinaccelerator/SOS] is 14-year expat Elyse Ribbons, CEO and founder of GeiLi Giving, a social enterprise that plans to engage Chinese people in philanthropy. “There are a lot of business opportunities in Shanghai because everything is developing quickly but also a lot of frustration,” she says. “Everything is a challenge and once you think you got to the top of the mountain there is another one.” She says locals and expats both feel the burden of navigating a complex bureaucratic system. “You must have a connection to get started or otherwise there is a whole marketplace on how to get around things,” she adds. For instance, her company cannot have a business WeChat account – the predominant social networking app in the country – because she does not have a Chinese ID number. As such she either needs to trust a Chinese local to open one in her company’s name or opt for a public account.

“Everything is a challenge and once you think you got to the top of the mountain there is another one .”

– Elyse Ribbons, CEO and founder of GeiLi Giving

Getting around

Ms Ribbons started GeiLi Giving after taking a 3-month “Stanford Ignite” course in which the professors challenged the participants to come up with a business idea. The premise was simple: as an expat Ms Ribbons noted that Chinese people don’t trust non-governmental organizations (NGOs) because they often serve as a front for something else. She says about 99% of the country’s 500,000 NGOs fail a basic transparency test. Hence, the company plans to pre-screen legitimate charities. “We want to disrupt the way Chinese people think about donating,” says Ms Ribbons.

GeiLi Giving has already enlisted about 20 charities. “We view it as you’re investing in a project instead of simply giving,” says Ms Ribbons. To encourage people to donate, the company uses gamification where users not only receive points for giving but more points for having their contacts do the same. Points can in turn be used to buy a dinner with a celebrity or another charity prize. The organization takes a 5% cut of donated amounts, which is low by industry standards, and hopes to seize on new NGO laws that were passed in China this spring.

The “prizes” are largely based around the personal network of Ms Ribbons, which is the way to do business in Shanghai. In fact, physical networking is more popular in Shanghai (41% of entrepreneurs engage in activities organized by local organizations) compared to the global average (23%).

A digital silk road ahead

Start-ups are often initiated via personal connections. “A lot of companies get started through school networks or through company teams in which a team leader takes the team with him,” says Mr Bean. But networking is also very different for foreigners and locals. “Expats network at events, cocktail get-togethers, in accelerator programs and social spaces,” says Ms Ribbons. “Chinese don’t socialize in that way.” Instead, business happens over dinner, through personal connections. Once you make contact, it’s all about keeping in touch via WeChat.

Perhaps due to language difficulties, local online networking is more popular in Shanghai (64%) than globally (36%). It is one reason GeiLi Giving opted for the mobile social media platform to solicit donations. “This way we reach the masses,” says Ms Ribbons. “But WeChat is much more than social networking: it is everything and the average Chinese person spends about 4 hours a day on the platform,” she adds. Perhaps due to the current strong government influence, such channels are also likely to contribute to the notion that the informal environment for business will become “very important” in the next three years in Shanghai (33%) compared to the global average (24%).

Having topped the World Bank’s Doing Business rankings1 (of 189 countries) for ten years running, Singapore might also be expected to be one of the world’s leading start-up cities. Judging by at least one international assessment, it is making progress in that direction. In 2015, for example, it rose to 10th position in the Global Startup Ecosystem Rankings, becoming the first Asia-Pacific city to break into this select group.

Rob Findlay, a senior vice-president at DBS Bank and co-founder of Next Bank, a financial industry community, thinks the city-state “has absolutely everything going for it” as a place to start a business. Only Hong Kong is a comparable location in Asia, in his view. A hands-on government approach toward start-ups is one contributing factor: “Singapore hits it out of the park compared to others when it comes to things like the large volumes the government is willing to invest in supporting entrepreneurs.”

“Singapore hits it out of the park compared to others when it comes to things like the large volumes the government is willing to invest in supporting entrepreneurs.”

– Rob Findlay, a senior vice-president at DBS Bank and co-founder of Next Bank

Much of the government’s energy has been focussed on encouraging the growth of support structures for start-ups. This has contributed to the growth on Singapore soil of home-grown and foreign-based accelerators and incubators. Prominent amongst the home-grown variety are JTC LaunchPad—a 5-hectare site for start-ups and incubators where integrated start-up spaces such as BASH are located—Joyful Frog Digital Incubator, Startup Nation, The Co-Foundry, and SPH Plug and Play. Overseas accelerators attracted to Singapore include Startupbootcamp Fintech (the UK), Muru-D (Australia) and Rockstart (the Netherlands).

Singapore entrepreneurs surveyed by the EIU confirm that formal support structures have been instrumental in helping them get their businesses off the ground. Business and industry associations top the list in terms of relative importance. According to Ted Chen, co-founder of Evercomm, an energy start-up and a serial entrepreneur, industry associations and government agencies are especially important for business-to-business (B2B) start-ups, and are where he has turned for expertise, introductions and even financial assistance.

Multiple cultures, multiple communities

Less formal networks and communities (the lack of structured programmes and commitments constituting their “informality) are also a valuable channel for obtaining advice, introductions and other support. Over half of the survey respondents point to informal communities and activities as important sources of support. Some of these are likely to be facilitated by international groups such as Startup Grind, or local organisations such as the Singapore Entrepreneurs Network (which has been operating since 2005) and Co-Founders Lab.

Different types of communities serve different groups of business founders. A unique feature of Singapore’s start-up scene, for example, is the diversity of its entrepreneurs. Mr Findlay, an Australian transplant who co-founded a community, says informal networks are numerous and extremely important for the city’s ex-pat contingent of entrepreneurs. “There are quite a lot of informal networks here that are about people’s common interests and skills, people who are new to town and people who have been here for a long time.” Singapore’s transient ecosystem has its advantages: local businesses can tap into a regularly replenished talent pool as they test their business models locally, before expanding into the rest of Asia.

Communities also cater to specific industries or areas of activity. Mr Findlay’s Next Bank (which is not exclusively focussed on start-ups) supports innovators in the financial industry. Ted Chen, an engineer by training, says that he often gets useful advice in events and forums organised by HackerspaceSG, a co-working space and community for software engineers. “Maker” communities— for individuals pursuing projects in small-scale production— are also now active in Singapore. “All these groups help open doors to advice, new skillsets and introductions to formal support structures,” says Mr Chen.

Singapore’s universities are another source of entrepreneur networks. According to Mr Chen, NTUitive – Nanyang Technological University’s commercial and venture arm – for example, hosts social events, while informal communities also revolve around individual faculty. These networks, says Mr Chen, can help alumni embarking on new ventures get introductions to larger companies and government agencies. He adds that, in Singapore, obtaining government grants or other support is difficult without the credibility a professor’s reference lends.

University networks have another important use. Most Singapore B2B start-ups must export to flourish, says Mr Chen; the domestic market is small, but a good base for expansion. Mr Chen taps into his university-based networks to help him make connections when launching into foreign markets, whether it’s next door in Malaysia or further afield in the US. The professors, he says, “seem to have connections everywhere”.

Digital denizens

Entrepreneurs in the city also make active use of online networks for support. Over half of those in the survey (56%) are connected into social networking groups on big global platforms, such as Facebook or LinkedIn. Over four in ten (42%) also connect with peers in locally oriented social networks. Moreover, the survey respondents tap into many such groups: 57% are involved in six or more global online groups, for example. Participation in such global social media networks have proven more helpful than any of the various types of networking activities for 46% of Singapore entrepreneurs.

Mr Findlay agrees that much practical advice is gained by new business founders in social media communities. The most popular used by his circle, in Singapore and around Asia, are mobile messaging platforms such as WhatsApp. He emphasises that these are used primarily for problem-solving, such as filling the gap for a skilled specialist, finding office space or getting suggestions for meeting specific technology challenges. “These are nice little bulletin boards,” he says.

Fear of the unknown

When asked about the toughest challenges new business founders face, Singapore survey respondents echo their counterparts elsewhere in citing financing difficulties and finding skilled employees. High on the Singapore list, however (second only to financing) comes the fear of failure. Entrepreneurs are stereotypically hardy characters, and those from Singapore appear to be no exception. It appears from the survey, for example, that Singapore entrepreneurs do not feel the need to seek emotional support from their networks and communities. The latter’s services as sounding boards and fonts of practical advice, however, are helping local entrepreneurs gain much-needed confidence as they get their new ventures off the ground.

1. The annually updated table from the World Bank compares the regulatory ease of doing business in each of the countries. Several, although not all, of the criteria are specific to starting a business.

Taiwan is generally seen as a good place to start a business. The 2016 Global Entrepreneurship Index (GEI) from the Global Entrepreneurship and Development Institute, a Washington, DC-based think-tank, rates the country as first in Asia and sixth globally.1 “The ease of recruiting software programmers is relatively high,” says Jamie Lin, FoundingPartner at AppWorks, a Taipei-based accelerator and venture capital company. “There are top quality engineers available at probably one-fifth of the cost compared to Silicon Valley.” One reason is the country’s transition from a manufacturing hub to a knowledge society in which there is less demand from large companies for this talent, which makes them available to start-ups.

Anecdotally cultural perceptions may also be changing in favour of start-ups. While older generations preferred stable corporate jobs at places such as Hon Hai Precision Industry Co., Ltd., also known as Foxconn, which is a global electronic components manufacturer for Apple (amongst others), the newer generation embrace small and “cool” companies. “Entrepreneurship may not traditionally have been as encouraged as compared to mainland China and the United States,” says Tina Cheng, partner and chief representative in Taiwan for Cherubic Ventures, a venture capital company. “But it appears to be a trend in which kids don’t necessarily take traditional jobs anymore and view entrepreneurship as a new type of career track.”

A mixed picture

However, in spite of these positive perceptions Taipei was not rated favourably as a place to start a business by EIU survey respondents: only 9% of entrepreneurs based in the city said it was easy to start a business compared to a global average of 26%. One particular reason gleaned from the survey is a lack of government support, which is higher in Taipei (76%) than the global average (72%). In fact, only 10% of Taipei respondents deemed their government to be “very effective” (compared to an average across cities of 15%).

“The government in Taiwan has realised they need to change,” says Ms Cheng. “They are looking at other governments in the region, such as Singapore, Korea and China, which are pumping money into their start-up ecosystems.” As a result there has recently been an increase in government funding, specifically to invest in start-ups, something that is likely to change future sentiment in this area. In August 2014, for instance, the National Development Council (NDC) of Executive Yuan, Taiwan started the “HeadStart Taiwan” programme in order to accelerate the development of technology innovation and entrepreneurship. The initiative includes deregulation, funding and the building of Taiwan Startup Stadium (TSS), a physical cluster located in downtown Taipei.

Enter VCs

The lack of government support has created a thriving environment for private incubators and venture capital companies, which have moved in to fill a void. Mr Lin founded AppWorks in 2009 specifically to take advantage of the country’s transition from a hardware to software-based technology industry. The company’s accelerator program is free and runs every six months, which means it now has an alumni network of 580 entrepreneurs across 275 start-ups. “I’m very proud of the economic impact we’ve had,” says Mr Lin, noting that the valuation of all start-ups in the AppWorks network is currently US$817m with annual revenues in the past 12 months of US$415m, creating 3,162 jobs. To take further advantage of this close-knit network, AppWorks raised US$61m into two VC funds in 2012 and 2014, which it has used to invest into 39 start-ups.

Cherubic Ventures is another venture capital firm looking to seise on the entrepreneurship community in Taipei. Started in 2010, it is an early stage seed investor with a portfolio of about 90 companies in the United States and “Greater China,” which includes Taiwan and Hong Kong. By being exposed to different markets, Ms Cheng notes that the biggest challenge in the Internet and Technology, Media and Telecommunications (TMT) industries in which the company invests – and a key difference between Taipei and the mainland China and American entrepreneurial markets – is a comparative lack of exits. As a result, there are fewer mentors to pass on the knowledge and experience of how to scale up beyond Taiwan or create a billion dollar company. “There are successful entrepreneurs in the Internet/TMT industry in Taiwan whose companies are profitable,” she adds. “But there are very few who have successfully sold their company or floated an initial public offering (IPO).”

The lack of potential mentors in Taipei can also be gleaned from the survey. Other entrepreneurs were not deemed as a “very important” source of support for entrepreneurs in Taipei (11%) when compared to the global average (20%). Another reason for this could be cultural, speculates Ms Cheng. In western culture it is far more common to share knowledge and information than it is in many Asian countries. “Hence there are two problems: there is a lack of mentors and a lack of sharing,” summarises Ms Cheng.

Formalising the informal

Cherubic Ventures is trying to enhance information-sharing by drawing on mentors outside of Taiwan who have the experience and willingness to participate. Currently an informal program, the company is looking to formalise it. This strategy is echoed at AppWorks. “We work with 50 mentors and some of them come from outside the country, in part because they are more willing to share their insights,” says Mr Lin. AppWorks now also runs a formalised alumni program to further facilitate information-sharing and holds reunions every six months for its accelerator program participants.

“We work with 50 mentors and some of them come from outside the country, in part because they are more willing to share their insights.”

-Jamie Lin, founding partner at AppWorks

Formalising informal networks appears to be the wave of the future in Taipei. In fact, in the next three years, the informal environment for business is only expected to become “very important” by 14% of respondents in Taipei – much less than the global average (24%). “Increasingly venture capital and other corporates are hosting happy hours or bring in interesting speakers,” notes Ms Cheng. For instance, a technology media outfit called Business Next, which has a “meet club” along these lines caters specifically to start-ups and holds monthly events.

Such blurring of the informal and formal has also gone digital. “In Taiwan, everyone uses Facebook,” says Mr Lin and reckons that about 90% of all active Internet users in the country have an active account. In fact, AppWorks itself is leveraging the social media platform and has created a Facebook group for all accelerator participants that they use to network with one another, an informal way to formalise networking.

Tel Aviv presents an anomaly as a start-up ecosystem. Most local entrepreneurs surveyed by the EIU state that, in their experience, launching a business in the city is difficult. They also give low marks to official support for entrepreneurial activity there, with no more than 29% (by far the lowest figure amongst the survey’s ten cities) saying the government role is effective.

Yet Tel Aviv is widely acknowledged to have one of the world’s most vibrant start-up environments. It is ranked fifth in the Global Startup Ecosystem Ranking 2015, the highest position of any city or region outside the US. According to the report’s authors, Tel Aviv has the highest start-up density (per 1,000 population) in EMEA, and enjoys an abundance of capital available at every funding stage as well as a wealth of local technology talent1. It is also a popular destination for visiting entrepreneurs from other countries hoping to learn the secrets of its start-up success2.

A supportive community

Tel Aviv’s vibrant entrepreneur communities are almost certainly a major contributor to this success. This is reflected in the survey, where Tel Aviv business founders are the most active participants in global social networking groups amongst the 10 cities covered3. They also value meeting fellow entrepreneurs in informal communities or activities more than those from any other city.

Patricia Lahy-Engel, director of The Hive by Gvahim, one of the city’s legion of start-up accelerators, remarks that there are numerous business-oriented meet-up groups in the city, many of them dedicated to specialist subjects. Some are industry specific while others are focused on specific recruiting needs, the best use of a new technology or how to market in particular countries. “New meet-up groups are created almost every other week,” she says. “They are natural-born communities, a complement to accelerators”

“New meet-up groups are created almost every other week.”

-Patricia Lahy-Engel, director of The Hive by Gvahim

As in London, New York and San Francisco, an open and relatively non-hierarchical business culture partly explains the popularity of such networking. Roy Oron, CEO of SOSA, which describes itself as a “business club for innovators”, agrees that a spirit of mutual support is a feature of many entrepreneur-friendly cultures, but he maintains that “In Israel it’s on steroids. It’s all about supporting each other, and this is particularly conspicuous in the technology sector,” the country’s most successful export industry.

Online platforms are used widely by the city’s (and country’s) entrepreneurs, and to good effect. Over half of the survey respondents (57%, more than in the other cities) report that their use of global social media platforms were helpful when they started their businesses. Ms Lahy-Engel reports that messaging platforms such as WhatsApp are favoured by entrepreneurs, while according to Mr Oron they frequently turn to Facebook groups to get advice. He cites a personal example to illustrate his point: “This morning I received a message on Facebook from an entrepreneur who’d read a comment I’d put on some Facebook Q&A page. He said he liked my perspective and asked if we could meet. He’s coming over here later and we’ll have a chat.”

Accelerated networking

Informal communities are also facilitated by many of the city’s accelerators. In Israel as a whole, accelerators number over 200, with most located in Tel Aviv. Multinational companies such as Microsoft launched accelerators beginning in 2011. The Citi group has operated a fintech accelerator since 2013. Home-grown rivals have sprouted up in parallel; the more prominent local accelerators today include The Junction, Elevator, UpWest Labs and EISP.

The Hive by Gvahim is another. According to Ms Lahy-Engel, it grew out of an informal community formed a decade ago to help highly-skilled immigrants find jobs in Israel. The formal accelerator component was launched in 2011 to help more entrepreneurial immigrants learn how to start a new business. Its founders understood, says Ms Lahy-Engel, that “First and foremost they need to create a network of people who are able to help new entrepreneurs, with contacts or with insights into how to make things happen in this market.” In her view, communities have better results when linked to a formal support programme of the type provided by accelerators. “Meet-up groups are great, but at a certain point they become less effective – you keep seeing the same people all the time. Accelerators give you structured support and also organise informal, meet-up type activities.”

Accelerator and other support programmes have expanded so fast, says Ms Lahy-Engel, that sometimes entrepreneurs as well as investors have difficulty knowing which ones are best suited to their needs. Mr Oron agrees. His organisation, SOSA (short for “South of Salame”), founded by a group of veteran entrepreneurs, was set up in his words to “unite all the different stakeholders under one roof”. Part accelerator, part technology platform and part co-working space, Mr Oron seeks to get start-ups as well as representatives of investors, incubators, corporates, service providers, educational institutions and others “working together and socialising in the same physical and virtual spaces”.

“Meet-up groups are great, but at a certain point they become less effective.”-Patricia Lahy-Engel, director of The Hive by Gvahim

Tel Aviv’s hyperactive start-up support scene has also spawned efforts to “federate” the different entrepreneur communities operating there. One such initiative is being led by Tel Aviv University’s StarTAU Entrepreneurship Centre. Another, in the financial sector, has been led by LeumiTech, a subsidiary of Bank Leumi. One benefit of such initiatives, hopes Ms Lahy-Engel, would be to encourage the adoption of standards by accelerators and other support structures. A recognition that standards are needed is a sure sign of a rapidly growing sphere of business activity that is likely to have staying power.